For the final question period of the fall legislature session, Green leader Andrew Weaver challenged the New Democrats over continuing some hefty subsides for natural gas drilling that were inherited from the B.C. Liberals.

Vaughn Palmer

Updated: December 6, 2017

B.C. Green Leader Andrew Weaver believes the NDP could find money for its election promises by addressing the deep well tax credit program and said as much on Tuesday.
CHAD HIPOLITO / THE CANADIAN PRESS FILES

VICTORIA — For the final question period of the fall legislature session, Green leader Andrew Weaver challenged the New Democrats over continuing some hefty subsidies for natural gas drilling that were inherited from the B.C. Liberals.

“Every year the B.C. government doles out hundreds of millions of dollars to oil and gas companies to subsidize horizontal drilling in the northeast of our province,” Weaver began, citing the credits offered to encourage drilling of deeper wells in exploring for natural gas.

“In recent years, the participating companies have amassed credits faster than they can spend them. The balance has increased from $752 million in 2012 to an accumulated $3.2 billion today. Not only are we not getting paid for this public resource, we are literally paying companies to take it from us.”

Then the question pitched to Michelle Mungall, cabinet minister for energy mines and petroleum resources, who’d supplied Weaver with precisely those amounts during earlier debate on her ministry budget.

“How can the minister justify continuing the deep-well royalty program when it is not needed by gas companies and it is such a staggering waste of taxpayer money?”

In contrast to the direct question from Weaver, Mungall’s answer was anything but.

“British Columbians want this government to ensure that projects are providing good family-supporting jobs, but they also want to make sure that projects are meeting high environmental standards — absolutely. They want to make sure that British Columbians are also getting a fair rate of return.

“Last year the province received $145 million in royalty revenue from natural gas development. This money obviously goes to help support the services that British Columbians rely on every day …”

Weaver made good use of a followup question to put Mungall’s $145 million into context. Those were the net returns from natural gas royalties after producers had deducted $229 million in credits, mainly for drilling deep wells.

“The deep-well royalty credit program was designed to enable the provincial government to share the costs of drilling in B.C.’s deep gas basins when it was a so-called risk-based industry,” continued the Green leader. “It’s not anymore. Horizontal fracturing is no longer a new technology. It’s become an industry norm.”

Then the sting: “Measured as a share of the value of oil and gas production in B.C., royalties collected by government has fallen from 44 per cent in 2008 to just four per cent last year.”

The government was giving away the resource, almost literally. How could Mungall and her colleagues justify continuing with such a giveaway?

The situation was not as bad as all that insisted Mungall.

“I just want to make sure that the member knows that many of the credits that he speaks of will actually likely never be used as older wells are closed,” she said, referring to the $3.2 billion accumulated in recent years.

“Just as an example, one well earned a million dollars worth of credits, but it’s been shut for 10 years. It’s not going to reopen, so it will not actually be realizing those credits. There are quite a few other examples exactly like this.”

Related

But if the NDP’s partner in power sharing wanted to know more, “I would be happy to set up a briefing so that he could get the full details … Question period doesn’t allow the time to go over all the details.”

Bottom line as she sees it: “So it’s not money going to government. It’s just that we’re collecting less royalties based on a credit program that looks to incentivize industry for doing a particular task that government is hoping it will do.”

The practice of reducing royalties to encourage development of the natural gas resource dates back to the last NDP government. In the spring of 1998, following direct consultations with the Calgary-based industry, the then-Glen Clark government offered royalty reductions in the 20 to 40 per cent range as an incentive to develop new wells.

In return, the New Democrats forecast a $25 billion bump in investment over 10 years. Some returns did materialize, though mostly after the government was driven from office in 2001.

The B.C. Liberals then expanded on the incentives, adding the deep well credits in 2003 and expanding them in 2009 and again in 2014. Meanwhile, prices slumped for the resource, generating a growing gap between annual royalties and the accumulated value of the credits.

Almost a decade ago, then auditor-general John Doyle drew attention to the way the accumulated credits represented hundreds of millions of dollars in foregone revenues that might never be realized. His successor Carol Bellringer has flagged the problem in her reports as well.

Nevertheless, NDP energy minister Mungall told the house that “in terms of reviewing the royalty credit program, there isn’t a plan to do so at this time.”

Weaver was not placated. In talking to reporters for an end-of-session interview this week, he listed cancellation of deep well credits as one way for the government to help pay for promises in the coming provincial budget.

When I asked him if he were inclined to take the minister up on the offer of a briefing on the credits, he said he would.

But he also told me that he regards it as likely to be a stalling action, and he intends to reapply pressure on the credits in the new year, perhaps hoping to prompt the New Democrats to a review.

This Week's Flyers

Comments

We encourage all readers to share their views on our articles and blog posts. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, and please keep your comments relevant and respectful. If you encounter a comment that is abusive, click the "X" in the upper right corner of the comment box to report spam or abuse. We are using Facebook commenting. Visit our FAQ page for more information.